The strike may be over, but the problems for Chicago’s teachers are only beginning. The Chicago Teachers’ Pension Fund will go bankrupt in a few years if nothing is done. The New York Times reports:
The Chicago Teachers’ Pension Fund has about $10 billion in assets, but is paying out more than $1 billion in benefits a year — much more than it has been taking in. That has forced it to sell investments, worth hundreds of millions of dollars a year, to pay retired teachers. . . .Having skipped its pension contributions for many years, Chicago is supposed to start tripling them in another year under state law. But the school district has drained its reserves. And it cannot easily turn to the local taxpayers because of a cap on property taxes. Borrowing the money would be difficult and expensive as well, because of a credit downgrade this summer. One of the few remaining choices would be to make deep cuts in other services.
Like many other workers relying on pensions for their retirement, Chicago’s teachers have backed themselves into a corner. Unless the fund’s investments see a miraculous turnaround, retired teachers will be relying on payments from the city to make up the massive gap in pension funding. Unfortunately, city finances are in dire straits as well, and the more money that goes into the pension fund, the less will be available to pay current teachers the higher salaries secured by their brand new contract.Now that the strike is over, the unions should focus on the real problem.